Tyco to split into three companies once again

Tyco, once one of the world's biggest conglomerates, is getting smaller.

G4S believes the merits of bundling cleaning, security, catering and property management into a single contract will justify the deal for ISS, which was the subject of a failed flotation this year. Photo: Alamy

The US-listed company, which split itself into three businesses in 2007, on Monday said it would be doing the same again in a move that sent its shares up more than 3pc.

Edward Breen, chief executive, is carving out three smaller companies: a residential security business, one focused on providing security to businesses and a flow-control systems division.

"The new standalone companies will have greater flexibility to pursue their own strategies for growth," he said. "These businesses operate with very distinct business models, each with different capital investments needs and growth profiles."

The reorganisation is the third dismantling of a Wall Street conglomerate in the past two months. In August, Kraft announced plans to split into two companies, one focused on snacks and the other on food. Then last week, McGraw-Hill, the owner of ratings agency Standard & Poor's, bowed to pressure from investors to split.

Tyco's second split in five years lifted its shares 3pc to $44.90, and analysts believe that the three divisions may be collectively worth $70 a share once separated.

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There was also speculation that each of the three new companies could be acquired before Tyco implements the split. The residential security business could be a target for private equity companies, while analysts said the flow-controls business, could tempt General Electric or United Technologies.

"The rationale for a split versus an outright sale is that these three constituent pieces did not make sense for a single bidder," said Stephen Tusa, an analyst at JP Morgan Chase. The biggest of the new companies – focused on commercial security, and will have 70,000 staff and annual revenues of $10bn – will continue to be incorporated in Switzerland. Mr Breen will stay on as non-executive chairman of the division.

Three years ago, Tyco demerged its electronics business, now known as TE Connectivity and Covidien, from its healthcare division.